RFID: State of the Market

RFID is an emerging standard for identification and tracking of goods. It’s one of the key underlying technologies for the Internet of Things. Yesterday we looked at the market for Internet fridges. Our conclusion was that until RFID tags become more common place on food items, Internet fridges will continue to be novelty appliances. In this post we look at the current state of RFID (Radio-frequency identification).

Some big names in the retail industry have climbed on board the RFID freight train. Notably Wal-Mart, which has not only adopted RFID big time, but pressured its suppliers to do so too.

The US retail giant issued a mandate to its top 100 suppliers in late 2004, requiring them to use RFID tags. The suppliers struggled to comply, so more Wal-Mart mandates followed. Finally, after years of slow take-up, Wal-Mart introduced fines for non-compliance in January 2008.

The Practical Problems of RFID

As CRM Buyer wrote recently, “while the expectation was that RFID would revolutionize the supply chain from end to end, achieving that transformation was an overly ambitious goal.” CRM Buyer pointed to issues such as the cost of tags, problems with reader accuracy, privacy and data integration.

Currently only a handful of Wal-Mart’s nearly 150 distribution centers are RFID-enabled, according to Bob Novack – an associate professor of supply chain management for Penn State. A big part of the problem is that it’s just too hard for suppliers to implement RFID technology. Even at the most basic level of signal interference between RFID chips and things like metal racks. The cost to implement RFID is also a challenge, particularly in a recession.

The CRM Buyer article goes on to state that while RFID may not be finding much success with front-end retail or distribution, it is finding better take up with back-of-the-store inventory and tracking high-value products (e.g. pharmaceuticals, electronics).

Bokodes: Could Compete With RFID in Some Areas

Perhaps the right technology hasn’t yet been found for item identification and tracking. This week MIT announced a new type of bar code, called a bokode. As the BBC reported, bokodes can hold thousands of times more information than bar codes and can be read by a standard mobile phone camera.

Bokodes could replace RFID systems “in some near-field communication applications,” suggested MIT Media Lab’s Ankit Mohan. For example, RFID cannot be used for credit cards, because the data can be read at a distance and so isn’t secure enough. Mohan thinks that the Bokode “could encode just as much information, but require an open line-of-sight to the card to be read, increasing security.”

While bokodes currently cost about $5 each in their prototype stage, MIT expects the price to drop to about 5 cents when produced in even relatively small volumes.

Conclusion

RFID is almost certainly here to stay, even if other ‘better’ technologies appear. As this deployment map from the RFID Journal shows, the technology is getting solid take-up even despite the practical difficulties. Tech companies such as IBM are also using RFID extensively. However, RFID is still a long way off replacing bar codes.

As far as consumer applications for RFID go, don’t hold your breath. Tim Berners-Lee was excited by the possibilities of RFID chips, for example enabling people to check information about individual products on the Web. Before we can do that kind of thing though, retailers and suppliers need to overcome many hurdles to even implement the baseline RFID technology.

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